<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
NOVEN PHARMACEUTICALS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
(LOGO)
NOVEN PHARMACEUTICALS, INC.
May 20, 1998
Dear Stockholder:
The 1998 Annual Meeting of Stockholders of Noven Pharmaceuticals, Inc. (the
"Corporation") will convene at 10:00 A.M. on Monday, June 29, 1998. The meeting
will be held at the Miami Marriott Dadeland Hotel located at 9090 South Dadeland
Boulevard, Miami, Florida and will address the matters referred to in the
enclosed Notice of Meeting.
Your proxy is also enclosed. If you do not plan to attend the meeting,
please review the enclosed material, make your decision and sign and return your
proxy in the return envelope provided. If you do not plan to attend the meeting,
sending in your proxy now will assure that your shares are voted. Be assured
that if you send in an executed proxy you may revoke it at any time before it is
voted at the meeting by filing with the Secretary of the Corporation a document
revoking it, by submitting a proxy bearing a later date, or by attending the
meeting and voting in person.
The Board of Directors, as well as the executive officers of the
Corporation, look forward to seeing you. We hope you will participate in your
Annual Meeting, if not in person, then by proxy.
Sincerely yours,
/s/ Steven Sablotsky
STEVEN SABLOTSKY
Chairman of the Board
<PAGE> 3
NOTICE OF ANNUAL STOCKHOLDERS MEETING OF
NOVEN PHARMACEUTICALS, INC.
(LOGO)
To the Stockholders of Noven Pharmaceuticals, Inc.
(the "Corporation"),
NOTICE IS HEREBY GIVEN, that the 1998 Annual Meeting of the Stockholders of
the Corporation will be held at the Miami Marriott Dadeland Hotel located at
9090 South Dadeland Boulevard, Miami, Florida, on Monday, June 29, 1998 at 10:00
A.M. for the following purposes:
1. to elect seven members to the Board of Directors for the ensuing
year; and
2. to ratify and approve the appointment of Deloitte & Touche LLP as
the independent certified public accountants of the Corporation for
1998.
May 19, 1998 has been fixed as the record date for the determination of the
Stockholders entitled to receive notice of, and to vote at, the Annual Meeting
or any adjournment thereof. All Stockholders are cordially invited to attend the
meeting in person.
Please return the proxy enclosed with this Notice as soon as possible so
that your shares can be voted at the 1998 Annual Meeting.
Please be sure that your proxy is signed and dated; it cannot be voted
without your signature.
STEVEN SABLOTSKY
/s/ Steven Sablotsky
Chairman of the Board
By Order of the Board of Directors
Dated: May 20, 1998
<PAGE> 4
NOVEN PHARMACEUTICALS, INC.
(LOGO)
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 29, 1998
PROXY STATEMENT
The Board of Directors of Noven Pharmaceuticals, Inc. (the "Corporation")
is soliciting proxies, the form of which is enclosed, to be used at the Annual
Meeting of Stockholders to be held on Monday, June 29, 1998, and at any
adjournment thereof. This proxy statement and the accompanying proxy card are
first being sent to Stockholders on or about May 20, 1998.
The shares of common stock ("Common Stock") represented by all properly
executed proxies received by the Corporation will be voted as specified by the
Stockholders. If no specifications are given, the Common Stock represented by
the proxy will be voted FOR Proposals 1 and 2. A Stockholder who has given a
proxy may revoke it at any time before it is voted at the meeting by filing with
the Secretary of the Corporation a document revoking it, by submitting a proxy
bearing a later date, or by attending the meeting and voting in person. Under
Delaware law, abstentions are treated as present and entitled to vote. Broker
non-votes will not be included in vote totals and will have no effect on the
outcome of the votes.
The expense of soliciting proxies will be borne by the Corporation. Proxies
will be solicited principally by mail, but directors, officers and regular
employees of the Corporation, who will receive no additional compensation, may
solicit proxies by any appropriate means. The Corporation will reimburse
custodians, nominees or other persons for their out-of-pocket expenses in
sending proxy materials to beneficial owners and obtaining proxies from such
owners.
YOU ARE REQUESTED, REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, TO SIGN AND
DATE THE PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
VOTING SECURITIES AND SHARE OWNERSHIP
On April 30, 1998 there were 20,475,531 shares of Common Stock, $.0001 par
value per share, outstanding. Each share of Common Stock entitles its owner to
one vote, either in person or by proxy, upon each matter to come before the
meeting.
The following table sets forth, as of April 30, 1998, information with
respect to the beneficial ownership of Common Stock by (i) each person known to
the Corporation to beneficially own more than 5% of the outstanding shares of
Common Stock, (ii) each director and named executive officer of the Corporation
who
<PAGE> 5
beneficially owns any shares of Common Stock and (iii) all directors and
executive officers of the Corporation as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
BENEFICIALLY PERCENTAGE OF
NAME OWNED(1) TOTAL
- ---- ------------------- -------------
<S> <C> <C>
Steven Sablotsky(2)......................................... 4,692,145 22.9%
Robert C. Strauss(3)........................................ 50,000 *
Mitchell Goldberg(4)........................................ 607,529 2.97%
Sheldon H. Becher(5)........................................ 105,957 *
Sidney Braginsky(6)......................................... 18,332 *
Lawrence J. DuBow(7)........................................ 23,332 *
Robin J. Norris, MD(8)...................................... 31,500 *
William A. Pecora (9)....................................... 64,458 *
Novartis Pharmaceuticals Corporation(10).................... 1,091,151 5.06%
59 Route 10
East Hanover, NJ 07936
Scudder Kemper.............................................. 1,140,100 5.57%
Investments, Inc.(11)
Two International Place
Boston, Mass 02110-4103
All directors and executive officers as a group (8 persons)
(2)(3)(4)(5)(6)(7)(8)(9))................................. 5,593,253 27.08%
</TABLE>
- ---------------
* (less than 1%)
(1) To the Corporation's knowledge, all shares of Common Stock are owned
beneficially, with sole voting and investment power, except as otherwise
noted.
(2) Includes 18,000 shares subject to options granted pursuant to the Stock
Option Plan (the "Plan") which become exercisable on or before July 19,
1998; does not include 82,000 shares subject to options granted pursuant to
the Plan a portion of which become exercisable after December 9, 1998; does
not include 20,275 shares owned by, or options to purchase 26,000 shares
held by his wife, Noreen Sablotsky, nor 34,400 shares held in custodial
accounts for the benefit of his minor children and for all of which Mr.
Sablotsky disclaims beneficial ownership.
(3) Shares subject to options granted pursuant to the Plan which are
exercisable on or before July 19, 1998; does not include 475,000 shares
subject to options granted pursuant to the Plan, a portion of which become
exercisable on December 12, 1998.
(4) Includes 9,000 shares subject to options granted pursuant to the Plan which
become exercisable on or before July 19, 1998; does not include 41,000
shares subject to options granted pursuant to the Plan a portion of which
become exercisable after December 9, 1998; does not include 2,800 held in
custodial accounts for the benefit of his minor children nor 1,500 shares
owned by his spouse and for all of which Mr. Goldberg disclaims beneficial
ownership.
(5) Includes 10,832 shares subject to options granted pursuant to the Plan
which become exercisable on or before July 19, 1998; does not include 4,168
shares subject to options granted pursuant to the Plan, a portion of which
become exercisable after June 3, 1999.
2
<PAGE> 6
(6) Shares subject to options granted pursuant to the Plan which are
exercisable on or before July 19, 1998; does not include 4,168 shares
subject to options granted pursuant to the Plan, a portion of which become
exercisable after June 3, 1999.
(7) Includes 18,332 shares subject to options granted pursuant to the Plan
which are exercisable on or before July 19, 1998; does not include 4,168
shares subject to options granted pursuant to the Plan, a portion of which
become exercisable after June 3, 1999.
(8) Shares subject to options granted pursuant to the Plan which are
exercisable on or before July 19, 1998.
(9) Includes 20,000 shares subject to options granted pursuant to the Plan
which become exercisable on or before July 19, 1998; does not include
30,000 shares subject to options granted pursuant to the Plan a portion of
which become exercisable after December 9, 1998.
(10) Shares subject to purchase through the exercise of certain warrants dated
November 15, 1991, April 1, 1993 and November 28, 1994, which have not been
exercised, in whole or in part, to date.
(11) On the most recent report on Schedule 13G/A filed on or about February 12,
1998 with the Securities and Exchange Commission, Scudder Kemper
Investments, Inc., a registered Investment Advisor, reported shared voting
power with respect to 481,500 shares.
ELECTION OF DIRECTORS--PROPOSAL (1)
Unless you specify otherwise on the accompanying proxy, it will be voted
for Steven Sablotsky, Robert C. Strauss, Mitchell Goldberg, Sheldon H. Becher,
Sidney Braginsky, Lawrence J. DuBow, and Fred G. Weiss, the nominees for
directors to serve until the next Annual Meeting of Stockholders or until their
successors are elected and qualified. All of the nominees have consented to
serve if elected. Directors will be elected by a plurality of the shares of
Common Stock present or represented and entitled to vote at the meeting.
If any nominee should become unavailable to serve, the proxies will be
voted for a substitute nominee designated by the Board of Directors in its sole
discretion. The Board of Directors knows of no reason to anticipate that this
will occur. Each of the nominees is presently a director of the Corporation.
The names of the directors and executive officers and information about
each is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Steven Sablotsky................................... 43 Chairman of the Board
Robert C. Strauss.................................. 56 President, Chief Executive Officer and
Director
Mitchell Goldberg.................................. 41 Director
Sheldon H. Becher.................................. 69 Director
Sidney Braginsky................................... 60 Director
Lawrence J. DuBow.................................. 66 Director
Fred G. Weiss...................................... 56 Director
Robin J. Norris, MD................................ 51 Vice President and Chief Operating Officer*
William A. Pecora.................................. 53 Vice President of Finance and Chief
Financial Officer
</TABLE>
- ---------------
* Until December 8, 1997
Mr. Sablotsky is a founder of the Corporation. He has served as Chairman of
the Board since its organization in January 1987, and served as President and
Chief Executive Officer from January 1987 until December 1997. He is a member of
the American Institute of Chemical Engineers.
3
<PAGE> 7
Mr. Strauss has been President and Chief Executive Officer and a Director
of the Corporation since December 12, 1997. From March 1997 to July 1997, he
served as President and Chief Operating Officer of Ivax Corporation. Since 1983,
he served in various executive positions with Cordis Corporation, including its
President, Chief Executive Officer and Chairman of the Board. Mr. Strauss serves
on the Board of Trustees of the University of Miami, and on the Board of
Directors of CardioGenesis Corporation, Columbia Laboratories, Inc. and American
Bankers Insurance Group, Inc.
Mr. Goldberg is a co-founder of the Corporation and served as Executive
Vice-President from July 1988 through April 1998 and as a director since January
1987. Mr. Goldberg is a cousin of Mr. Sablotsky.
Mr. Becher has been a director of the Corporation since January 1987 and is
Chairman of the Board and President of Becher, Yeager, Nall, Sherburne, Bernard
& Company, P.A., Certified Public Accountants, a position he has held for over
10 years, including its predecessor company. Mr. Becher was the chief financial
officer of the Corporation from December 1987 until October 1992. Mr. Becher
serves as Chairman of the Audit Committee and the Executive Compensation
Committee.
Mr. Braginsky has been a director of the Corporation since June 1992 and is
President and Chief Operating Officer of Olympus America, Inc. an international
manufacturer of consumer products, cameras, tape recorders, medical endoscopes,
optoelectronic equipment, biological and industrial microscopes and clinical
analyzers. Mr. Braginsky serves on the Board of Directors of Olympus America,
Inc., where he has been employed since 1970. Mr. Braginsky serves as a member of
the Audit Committee, the Executive Compensation Committee and the Stock Option
Committee.
Mr. DuBow has been a director of the Corporation since June 1992 and is the
founder and Chairman of the Board of HMS Sales and Marketing, Inc., which is
presently engaged in marketing pharmaceutical products. Since 1957, he was
engaged in various capacities within the pharmaceutical industry, including
president and principal stockholder of Lawrence Pharmaceuticals, Inc. Mr. DuBow
was the former President of the Drug Wholesalers' Association and a former
Chairman of the National Wholesale Druggists' Association. Mr. DuBow serves as a
member of the Audit Committee, the Executive Compensation Committee and the
Stock Option Committee.
Mr. Weiss has been a Director of the Corporation since December 1997. Since
January 1997, he has been managing director of FGW Associates, a private
consulting company. Prior thereto, he was Vice President of Planning, Investment
& Development of Warner-Lambert Co. for 13 years. Mr. Weiss serves as a member
of the Audit Committee, the Executive Compensation Committee and the Stock
Option Committee.
Dr. Norris served as Vice-President and Chief Operating Officer of the
Corporation from April 1995 until December 8, 1997. From March 1993 until
January 1995, Dr. Norris was Vice-President of Medical Affairs for Biostar,
Inc., a diagnostics company. From 1990 until March 1993, he served as
Vice-President of New Product Development for Rhone-Poulenc Rorer, Inc.
Mr. Pecora has served as Vice President of Finance and Chief Financial
Officer of the Corporation since September 1992. From September 1987 until
September 1992, Mr. Pecora was Vice-President of Finance of Elexis Corporation,
a public company engaged in manufacturing health care accessories. Prior
thereto, he served as Senior Vice-President of Finance and Administration for
International Jensen, Inc., a division of Esmark, Inc.
4
<PAGE> 8
INFORMATION REGARDING THE BOARD OF DIRECTORS
The Board of Directors held ten meetings in 1997 and took action by
unanimous written consent on two occasions. Each director attended more than 75
percent of the meetings of the Board of Directors, and the Committees on which
he served.
AUDIT COMMITTEE
The Audit Committee reviews the financial statements of the Company and
management's disclosures and recommends to the Board of Directors the
independent public accountants to be employed by the Corporation. The Audit
Committee also confers with the independent public accountants concerning the
scope of the audit and, on completion of their audit, reviews the accountants'
findings and recommendations, reviews the adequacy of the Corporation's system
of internal accounting controls and reviews areas of possible conflicts of
interest and sensitive payments. The Audit Committee held three meetings in
1997.
EXECUTIVE COMPENSATION COMMITTEES
The Executive Compensation Committee develops and implements formal
policies with respect to executive compensation in order to best link future
compensation to the level of performance of the executive and the overall
performance of the Corporation. The Executive Compensation Committee held four
meetings in 1997.
STOCK OPTION COMMITTEE
The Stock Option Committee administers the Corporation's Stock Option Plan.
The Stock Option Committee also evaluates and makes recommendations to the Board
of Directors concerning stock option plans and other benefit programs. The Stock
Option Committee held three meetings in 1997.
COMPENSATION
Directors
Directors of the Corporation, who are also employees, do not receive any
stated salary for services rendered in their capacity as directors but, by
resolution of the Board, a fixed fee and/or reimbursement of expenses may be
provided for attendance at each meeting. No such fees or reimbursements were
paid in 1997.
Each director not employed by the Corporation receives $7,500 per year for
his services as a director, in addition to $750 for each Board meeting attended
and $750 for each Committee meeting attended. In addition, the Chairman of each
Committee receives $2,500 per year for his services as Chairman.
Further, in June 1997, Messrs Becher, Braginsky and DuBow were each awarded
options to purchase 5,000 shares upon re-election to the Board of Directors
pursuant to the terms of the Stock Option Plan.
5
<PAGE> 9
Executive Officers
The following table sets forth all compensation paid or accrued during the
three fiscal years ended December 31, 1997 by the Corporation for services
rendered by certain executive officers of the Corporation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------------
--------------------------- SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION* YEAR SALARY BONUS OPTIONS
---------------------------- ---- -------- ------- ---------------------
<S> <C> <C> <C> <C>
Steven Sablotsky............................. 1997 $373,077 0 0
Chairman of the 1996 $325,000 $65,000 60,000
Board 1995 $290,000 $50,000 40,000
Robert C. Strauss**.......................... 1997 $ 7,692 0 525,000
President and Chief 1996 N/A N/A N/A
Executive Officer 1995 N/A N/A N/A
Mitchell Goldberg............................ 1997 $189,038 0 0
Executive Vice 1996 $165,000 $33,000 30,000
President 1995 $150,000 $25,000 20,000
Robin J. Norris, MD***....................... 1997 $211,038 0 0
Vice President and 1996 $187,000 $37,500 25,000
Chief Operating 1995 $121,000 $15,000 115,000
Officer
William A. Pecora............................ 1997 $129,231 0 0
Vice President of 1996 $110,000 $22,000 20,000
Finance and Chief 1995 $104,000 $10,000 20,000
Financial Officer
</TABLE>
- ---------------
* Includes President (chief executive officer) and most highly compensated
executives whose salary and bonus exceeded $100,000 in 1997.
** Mr. Strauss' employment with the Corporation became effective December 12,
1997; therefore, the salary as listed is for that portion of the year.
*** Dr. Norris' employment with the Corporation terminated on December 8, 1997.
6
<PAGE> 10
STOCK OPTIONS
The following table sets forth all grants in 1997 of stock options to the
executive officers named in the Summary Compensation Table.
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES OF
OPTIONS STOCK PRICE APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES OR BASE EXPIRATION -----------------------------
NAME GRANTED IN 1997 PRICE DATE 5% 10%
- ---- ------- ---------- -------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Strauss.................. 525,000 85.85% 6.18 12/12/04 $1,307,534 $3,079,031
</TABLE>
The following table sets forth certain information with respect to
outstanding stock options held at year end by the named executive officers or
exercised under the Plan in 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
HELD AT DECEMBER 31, 1997 DECEMBER 31, 1997(2)
SHARES ACQUIRED VALUE --------------------------------- ---------------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
- ---- --------------- -------------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Steven Sablotsky..... N/A N/A 18,000 82,000 $ -- $ --
Robert C. Strauss.... N/A N/A 50,000 475,000 $41,000 $389,500
Mitchell Goldberg.... N/A N/A 9,000 41,000 $ -- $ --
William A. Pecora.... 8,192 49,152 20,000 30,000 $ -- $ --
Robin J. Norris...... N/A N/A 31,500 -- $ -- $ --
</TABLE>
- ---------------
(1) Represents difference between exercise price and market price of Noven
Common Stock on date of exercise.
(2) Represents difference between exercise price and market price of Noven
Common Stock on December 31, 1997 ($7.00).
EMPLOYMENT AGREEMENTS
In December 1994, the Corporation entered into three-year employment
agreements with Steven Sablotsky and Mitchell Goldberg. Each of these agreements
provided for annual cost of living increases and additional annual increases and
bonuses at the discretion of the Board of Directors. Mr. Sablotsky's agreement
provided for, among other things, life and disability insurance and an
automobile. Mr. Goldberg's employment agreement provided for, among other
things, life and disability insurance. These agreements expired on December 31,
1997.
On December 12, 1997, the Corporation entered into an Employment Agreement
with Robert C. Strauss, as President and Chief Executive Officer. This Agreement
expires on December 31, 2002 unless extended for consecutive one year terms
under certain conditions. Mr. Strauss' base salary under the Agreement is
$400,000 per annum subject to cost of living increases each year and further
increases and incentive compensation at the sole discretion of the Board of
Directors. In addition, Mr. Strauss was granted options to
7
<PAGE> 11
purchase 525,000 shares of common stock at a per share exercise price of $6 3/16
pursuant to the provisions of the Stock Option Plan. Options for 50,000 shares
of common stock vested and became exercisable immediately, and the remaining
shares are subject to vesting over a five year period. Mr. Strauss is also
entitled to participate in all incentive, savings and retirement plans as well
as welfare benefit plans that are available to executive officers of the
Corporation. Further, upon termination "without cause" (as defined in the
Agreement), including termination after a "change of control" through (i) the
acquisition of 30% or more of the then issued and outstanding shares of common
stock of the Corporation by any person, entity or group (within the meaning of
Section 13(d)(3) or 14(d) of the Securities Exchange Act of 1934), (ii) the
reconstitution of the Board of Directors whereby the existing members cease to
constitute at least a majority of the Board, (iii) the approval of a
reorganization or consolidation, where stockholders of the Corporation do not,
immediately thereafter, own more than 51% of the combined voting power of the
reorganized, merged or consolidated corporation, (iv) a liquidation or
dissolution of the Corporation, or (v) a sale or distribution of all or
substantially all the assets of the Corporation, Mr. Strauss would be entitled
to a lump sum payment equal to his then annual base salary and an additional one
year base salary paid over a period of two subsequent years, as well as the
vesting of 50% of outstanding options not otherwise vested.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
rules issued thereunder, the Corporation's executive officers and directors are
required to file with the Securities and Exchange Commission reports of
ownership and changes in ownership of the Common Stock. Copies of such reports
are required to be furnished to the Corporation. Based solely on its review of
the copies of such reports furnished to the Corporation, the Corporation
believes that during 1997 all of its executive officers and directors complied
with the Section 16(a) requirements.
8
<PAGE> 12
STOCKHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total Stockholder return on the Corporation's Common Stock against the
cumulative total return of the Russell 2000 Stock Index and Peer Group (Value
Line Drug Industry) for the five year period through December 31, 1997.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS*
NOVEN COMMON STOCK, RUSSELL 2000 INDEX AND PEER GROUP**
(PERFORMANCE RESULTS THROUGH 12/31/97)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NOVEN DRUGS (PEER
(FISCAL YEAR COVERED) PHARMACEUTICALS RUSSELL 2000 INDEX GROUP)
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 109.71 118.91 98.71
1994 96.12 116.55 103.00
1995 87.38 149.70 184.33
1996 108.74 174.30 243.78
1997 54.37 213.00 418.53
</TABLE>
Assumes $100 invested at the close of trading on the last trading day preceding
the first day of the fifth preceding fiscal year in Noven Common Stock, Russell
2000 Index and Peer Group.
* Cumulative total return assumes reinvestment of dividends.
** Peer Group consists of Value Line Drug Industry.
9
<PAGE> 13
TRANSACTIONS WITH MANAGEMENT AND OTHERS
For the year ended December 31, 1997, the Corporation paid $98,685 to the
accounting firm of Becher, Yeager, Nall, Sherburne, Bernard & Company, P.A.
Sheldon H. Becher, a director of the Corporation, is the Chairman of the Board,
the President and a stockholder of this firm.
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Policy
The Corporation's executive compensation program is administered by the
Compensation Committee (the "Committee"), which consists of four non-employee
directors. The compensation program is based on the general principle that
compensation be designed to allow the Corporation to secure and retain the
services of high quality executives.
The Corporation's compensation program consists of the following three
components: 1) a base salary, 2) annual incentives and 3) long-term incentives.
The Corporation's annual incentives are awarded in the form of cash bonuses and
long-term incentives are awarded in the form of stock options.
It is the Committee's belief that the base salary should be the major fixed
element of an executive compensation package. The base salary for executives is
targeted at the mean level for competitors in the pharmaceutical industry. For
the purpose of establishing these levels, the Corporation compares itself to a
self-selected group of six pharmaceutical companies that compete with the
Corporation in business or who are in competition with the Corporation for
executive talent.
The Committee further believes annual incentives, in the form of cash
bonuses, should be used to reward an individual executive for exceptional
performance. Thus, annual incentives can serve as a motivational tool to focus
the executive's attention on his own performance. The determination of what is
exceptional performance is, at this stage, a subjective one made by the members
of the Committee based on general criteria, including the executive's role in
the progress of the Corporation's products, regulatory matters, organizational
staffing and other corporate developments. Annual incentives also allow the
Committee to adjust compensation packages on an annual basis so that they remain
competitive.
Stock options allow the Corporation to motivate executives to increase
stockholder value. This type of incentive also allows the Corporation to recruit
members of the management team whose contributions and skills are important to
its long-term success. Incentives, in the form of stock options, also provide
the Corporation with a method of compensation that avoids cash expenditures.
Recommendations concerning stock options and the administration of the
Corporation's Stock Option Plan are made by the Stock Option Committee.
The Committee evaluates the following seven factors in order to determine
an adequate level of total compensation:
(1) Type of responsibility of the executive;
(2) Executive's level within the Corporation;
(3) Corresponding amounts paid by members of the defined competitive
industry group;
(4) Supply and demand factors;
(5) Size of Corporation;
10
<PAGE> 14
(6) Executive performance; and
(7) Corporation's profitability.
The Committee assigns no specific weight to any of the foregoing factors
when making compensation determinations.
Chief Executive Officer Compensation
Mr. Sablotsky was the Corporation's Chief Executive Officer through
December 12, 1997, with his base salary set by contract. Mr. Sablotsky did not
receive a bonus for 1997, nor was he granted any stock options. He presently
serves as the Chairman of the Board at the same salary received in 1997
(increased by a cost of living factor) and with the same benefits.
The Committee took into account the Corporation's financial performance in
1997 as compared to 1996, as well as the recent employment of Robert C. Strauss
as President and Chief Executive Officer, in its determination.
Compensation Committee:
Sheldon H. Becher (Chairman)
Sidney Braginsky
Lawrence J. DuBow
Fred G. Weiss
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION OF ALL NOMINEES.
RATIFICATION AND APPROVAL OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS -- PROPOSAL (2)
The Corporation has been advised that a representative of Deloitte & Touche
LLP will be present at the 1998 Annual Meeting and will have an opportunity to
make a statement and to respond to appropriate questions raised.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present, or represented and entitled to vote at the meeting, is
necessary for the ratification and approval of the appointment of Deloitte &
Touche LLP. In the event of a negative vote on the ratification of such
selection, the Board of Directors will reconsider its selection.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION AND APPROVAL OF
THE SELECTION OF DELOITTE & TOUCHE LLP AS THE CERTIFIED PUBLIC ACCOUNTANTS OF
THE CORPORATION FOR 1998.
OTHER BUSINESS
The Board of Directors does not know of any other business to be presented
at the meeting and does not intend to bring before the meeting any matter other
than the proposals described herein. However, if any other business should come
before the meeting, or any adjournment thereof, the person(s) named in the
accompanying proxy will have discretionary authorization to vote all proxies in
accordance with their best judgment.
11
<PAGE> 15
STOCKHOLDER PROPOSALS
Proposals on matters appropriate for Stockholder consideration, consistent
with the regulations of the Securities and Exchange Commission, which are
submitted by Stockholders for inclusion in the proxy statement and form of proxy
for the 1999 Annual Meeting of Stockholders, must be received by the Corporation
on or before January 20, 1999. Such Stockholder proposals may be mailed to the
Secretary, Noven Pharmaceuticals, Inc., 11960 Southwest 144th Street, Miami,
Florida 33186.
GENERAL
In order that all holders of Common Stock may be represented at the Annual
Meeting, it is extremely important that proxies be returned promptly.
PLEASE SIGN, DATE AND MAIL OR OTHERWISE DELIVER THE ENCLOSED PROXY. THE
ACCOMPANYING ADDRESSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
Stockholders mailing or otherwise delivering their proxies who attend the
meeting may, if desired, revoke their proxies and personally vote their shares
by ballot at the meeting. Your cooperation in promptly returning your proxy will
be appreciated and will help secure, at an early date, a quorum for our meeting.
By order of the Board of Directors
/s/ Steven Sablotsky
STEVEN SABLOTSKY
Chairman of the Board
12
<PAGE> 16
Appendix A
NOVEN PHARMACEUTICALS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 29, 1998
The signer(s) hereby appoint(s) Steven Sablotsky, Robert C. Strauss and
Sheldon H. Becher, or any one of them, with power of substitution in each,
proxies to vote all Common Stock of the signer(s) in Noven Pharmaceuticals, Inc.
at the Annual Meeting of Stockholders, to be held June 29, 1998, and at all
adjournments thereof, as specified on the matters indicated hereon, and in their
discretion on any other business that may properly come before such Meeting.
This Proxy is solicited on behalf of the Board of Directors.
1. ELECTION OF DIRECTORS
To elect seven directors for a term of one year as indicated below:
Steven Sablotsky, Robert C. Strauss, Mitchell Goldberg, Sheldon H. Becher,
Sidney Braginsky, Lawrence J. DuBow and Fred G. Weiss
2. PROPOSAL TO RATIFY AND APPROVE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR 1998.
The shares represented by this Proxy will be voted as directed by the
Stockholder(s) on the reverse side hereof. If this Proxy is signed and returned
but no direction is indicated, this Proxy will be voted FOR the election of
directors and Item 2 as set forth in the Proxy Statement dated May 20, 1998.
(Vote and sign on the other side. Signature(s) should be exactly as
addressed. When signing as Attorney, Executor, Administrator, Personal
Representative, Trustee or Guardian, please give your full title as such.)
<TABLE>
<S> <C> <C>
-----------------------------
Please mark your vote
with an X.
Avoid using red ink
-----------------------------
</TABLE>
1. ELECTION OF DIRECTORS
The Board of Directors recommends a vote FOR Item 1.
<TABLE>
<S> <C>
[ ] Vote For all Nominees* [ ] Withhold vote for all Nominees
</TABLE>
*To withhold authority to vote for any Nominee write the Nominee's name here:
- --------------------------------------------------------------------------------
2. RATIFY AND APPROVE ACCOUNTANTS
The Board of Directors recommends a vote FOR Item 2.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated ________________, 1998
-----------------------------------
Signature of Stockholder
-----------------------------------
Signature (if joint)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY. DO NOT FOLD, STAPLE, OR
MUTILATE.
